Bench Play

Harriet Miers and the troubled Texas Lottery

Early in the morning of October 3, President George W. Bush nominated his White House counsel, Harriet Miers, to replace Sandra Day O’Connor on the U.S. Supreme Court. The Oval Office ceremony lasted less than 15 minutes. Miers has never served as a judge, nor is she a constitutional scholar or a celebrated litigator. She’s argued roughly two dozen cases in open court and none before the Texas Supreme Court. Miers is a respected, though unspectacular, corporate attorney known for handling business disputes?cases that she often settled. With much of his nominee’s legal work hidden behind corporate settlements and confidentiality agreements, Bush reached for Miers’ most visible public experience in his statement that Monday morning: her tumultuous five-year stint on the Texas Lottery Commission. “When I came to office as the governor of Texas, the Lottery Commission needed a leader of unquestioned integrity,” Bush said. “I chose Harriet because I knew she would earn the confidence of the people of Texas…. She delivered results.” The biography of Miers released by the White House puts the administration’s view more bluntly, “When then-Governor Bush appointed Ms. Miers to a six-year term on the Texas Lottery Commission, it was mired in scandal, and she served as a driving force behind its cleanup.”

The Texas Lottery-the seventh largest in the world-has certainly been submerged in scandal for most of its history, but, contrary to the administration’s spin, Miers’ work on the commission didn’t draw comparisons in Texas with Eliot Ness cleaning up Al Capone-era Chicago; neither, however, was she the rampaging Bush crony portrayed by some conspiracy theorists on the left. Instead, interviews with former lottery officials and a review of agency and court documents reveal a dutiful bureaucrat who successfully shielded her governor from the lottery’s many scandals for most of her tenure.

Bush appointed Miers, his personal attorney at the time, to the three-member Lottery Commission on May 4, 1995, about four months into his first term as governor. Even as chair of the commission, Miers’ power was limited. The Texas Lottery, launched in May 1992, is one of the most privatized in the nation; a Rhode Island-based gambling company called GTECH has operated the lottery its entire history. The state agency, meanwhile, oversees its contractors, with much of the power concentrated in the hands of the executive director. During Miers’ tenure, the commissioners served as unpaid, ostensibly part-time, guardians.

When Miers arrived at the commission in 1995, the lottery, after a troubled start, was humming along, mostly scandal free, in its fourth year. Political observers in Austin have long speculated that Bush dispatched his trusted personal attorney to clear out the Democrats?appointed by former Gov. Ann Richards-from the lottery’s hierarchy. Nora Linares, a prominent Democrat, had served as the lottery’s executive director since the agency’s inception. “For Harriet to say she was brought in to clean up the lottery ignores the timeline. She’s got it backwards: Things were great when she got there and a terrible mess when she left,” says Charles Soechting, a San Marcos-based lawyer who represented Linares then, and today is chairman of the Texas Democratic Party.

However, Miers worked amicably with Linares and the lottery staff for more than 15 months before controversy hit the agency. In November 1996, conflict-of-interest accusations surfaced against Linares. Several newspapers reported that GTECH had hired Linares’ boyfriend, Mike Moeller, as an out-of-state contractor in 1992 and 1993, around the time that Linares had awarded GTECH the lucrative Texas Lottery contract. Linares assured Miers and the Lottery Commission that she knew nothing about Moeller’s contract, according to court documents. It was the beginning of a bizarre three-year series of scandals involving GTECH and its multi-million dollar lottery contract that eventually implicated some of the biggest names in Texas politics, including Bush.

Miers seemingly sped along Linares’ departure. While the public scandal grew, Miers placed a public gag order on her executive director. She then called an odd press conference on December 16, 1996, to announce that 182 agency files were missing and to publicly question the lottery’s staff. The very next day, lottery officials announced that, in fact, the files had never gone missing. Later, when Linares wanted to look over lottery security documents, Miers called in Texas Rangers to guard agency files. All this led Linares to file a lawsuit against the Lottery Commission, even while she was still serving as its director. The three commissioners fired Linares at their very next meeting, on January 7, 1997.

A few weeks later, federal prosecutors implicated GTECH lobbyist Ben Barnes, a prominent Democrat, and former Texas House speaker and lieutenant governor, in kickback allegations against a GTECH executive. Barnes was later cleared of any wrongdoing in that case, but the news focused attention on Barnes’ lobbying contract with GTECH. Barnes had helped bring the lottery and GTECH to Texas. The company paid him a percentage of its earnings from the Texas Lottery, as long as Barnes helped it keep the contract. Together, Barnes and lobby partner Ricky Knox were earning a reported $3 million a year, which was 4 percent of GTECH’s annual revenues on their Texas contract, according to press accounts at the time. Neither man would comment for this story. Amid public pressure and criticism from Miers, GTECH cut Barnes loose, buying out his contract in February 1997 for a cool $23 million. But his role in the Harriet Miers and George W. Bush story was far from over.

In February 1997, Miers and the Lottery Commission began to discuss replacing GTECH as the lottery operator. It was an issue fraught with power politics given the billions at play in the lottery: the Texas Lottery contract accounted for about 15 percent of GTECH’s total revenues at the time. Adding to the intrigue, Miers’ Dallas law firm had, until 1996, represented EDS, a company openly interested in taking GTECH’s place. “Certainly I will tell you that we had issues with GTECH,” says Anthony Sadberry, a Houston attorney who served on the Lottery Commission at the time with Miers. “But I don’t believe it was anyone saying, ‘because of these things we’re hearing, we should rebid the contract.’ My sense is that all three commissioners wanted to know if we had the best deal we could get and was there something better out there.”

The commission hired Lawrence Littwin, a New Yorker and veteran lottery operator, as executive director in June 1997. It would be his responsibility to seek proposals to replace GTECH. Miers and the Lottery Commission had gone through two interim directors since Linares’ firing five months earlier. Littwin’s presence caused more controversy, though, not less. He had once worked as an executive for GTECH’s main rival, AWI, a company that craved the Texas contract. Littwin also launched an investigation of GTECH campaign contributions to state legislators. When it became public that Littwin had sent lottery investigators to sift through state campaign records, several prominent state officials, including Miers, attacked Littwin in the media. Commissioners voted to fire their relatively new hire-the fourth director in less than a year-in October 1997.

In the meantime, the State Auditor’s Office had released a scathing report on the Texas Lottery in August 1997-more than two years after Miers’ arrival. The auditor’s report brimmed with accusations of conflicts of interest and poor management. It cited the lottery for maintaining too little oversight of GTECH and accused the company of a “less than arms length relationship” with elected state officials and the Lottery Commission.

And yet, despite all the criticism of GTECH and the lottery, Miers and the commission decided to keep the company as their contractor. In February 1998, after a year of taking proposals from other potential contractors at a cost of more than $300,000 to the state, the three commissioners voted to close down the bidding process. Then-Executive Director Linda Cloud had decided to end the bidding, saying that GTECH’s deal was the best the state could get. Miers and the commission ratified the decision.

The troubles didn’t end.

Littwin filed a lawsuit against GTECH in federal district court in Dallas in December 1998, claiming that the company had orchestrated his firing. Littwin’s attorneys set about trying to take depositions from the lottery’s major figures, including Miers, Cloud, and, most intriguingly, Barnes. Included in the Littwin case file is an anonymous letter addressed to U.S. Attorney Dan Mills. The letter alleges that the GTECH contract was extended in 1996 because Barnes held information that could have jeopardized George W. Bush’s gubernatorial re-election campaign in 1998. While serving as speaker of the Texas House in 1968, Barnes had been instrumental in helping Bush win a coveted slot in the Air National Guard and thus avoid service in Vietnam. According to the unsigned letter, Reggie Bashur, who served as deputy chief of staff for Governor Bush, approached Barnes with a deal: keep quiet about the National Guard and the $3 million a year from GTECH continues to flow. Sometime after Barnes lost his lobby contract in February of 1997, Bashur took over as GTECH’s lobbyist.

Littwin’s attorneys convinced a judge to allow them to depose Barnes about the allegations. The September 27, 1999, deposition of Ben Barnes in Littwin v. GTECH Corporation et al. has taken on an almost legendary aura. “It’s the unicorn of Texas politics,” says Deece Eckstein, director of the Southwest region for the liberal advocacy group, People for the American Way. After the five-hour deposition, Barnes’ lawyer Charles Burton read a short statement in which he said his client had acknowledged that he had recommended Bush for the Texas Air National Guard at the behest of a Bush family friend. He also said that he had “no knowledge” that either Bush or his father knew about it. As part of the settlement in the case that came almost exactly a month after the deposition, all documents produced in the litigation, including Barnes’ testimony, were ordered to be destroyed or handed over to GTECH.

What else Ben Barnes said in that five-hour deposition is still unknown. Did anyone ever threaten to take away GTECH’s contracts if he talked about the governor and his guard service? Was money exchanged between GTECH and elected officials, including those in the governor’s office? Was Barnes’ $23 million payout in 1997 contingent on GTECH keeping its contract?

If Democratic senators on the Senate Judiciary Committee want to know more about Miers and her tenure on the Lottery Commission, Barnes is the best person to ask. Perhaps no one is better positioned to answer the question of whether Harriet Miers really cleaned up the lottery. It won’t be hard for the Democratic Senators to find Barnes. According to the Center for Responsive Politics, he’s one of their bigger contributors, including $4,000 over the past two years to Sen. Ted Kennedy, who sits on the Judiciary Committee. (Since 2003, Barnes gave $98,300 to Democratic Senators, including 21 who are currently in office.) Kennedy’s office declined to answer whether the senator had already spoken with Barnes about Miers.